Magma Fincorp Q3 Review - Strategic Reorientation Yielding Results; Value Unlocking To Drive Rerating: ICICI Securities
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ICICI Securities Report
Magma Fincorp Ltd.’s Q3 FY21 earnings were a mixed bag as rise in vulnerable pool (stage-two plus stage-three) and higher credit cost (more than 500 basis points) were offset by stringent cost controls and better net interest margins (due to focus on high-yielding products).
Month-on-month improvement in collection efficiency (97% in January 2021) and overall provisioning buffer of 5.3% suggest that stress should peak out soon.
Strategically, the company has stopped sourcing low-return on assest products (namely new cars, commercial vehicle, construction equipment, etc.) and will deploy the capital release towards focused products (used assets, tractors, housing).
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